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Businesses crying over capital shortage as banks tighten lending
The doors to commercial banks these days seem to be closed to businesses. Several months ago, banks tightened VND credit, and now they have begun limiting US$ credit.
Businesses have criticised commercial banks for not providing loans, thus stagnating their businesses. But banks say that they are not at fault in limiting loans, and say businesses should talk to the State Bank of Vietnam, not them.
State Bank or babysitter?
The Deputy Chairman of the Management Board of a big bank which has the chartered capital of VND3tril said recently that the central bank keeps day-to-day control over the bank’s credit growth.
“The central bank reminds us of the regulation on reining credit growth rate at 30% if it finds any sign of high growth rate,” he said.
Everyday, in the afternoon, commercial banks must submit report about loans and deposits to the State Bank of Vietnam for management. With their baby-sitter always at their back, no bank dares lend more than the allowed level.
Meanwhile, banks are facing strong criticism from businesses as banks are considered unfaithful in relations with businesses. Banks once tried to persuade businesses to use their services and borrow money from them, but now they ignore loan proposals from businesses.
The representative of a joint stock bank complained that the 30% credit growth rate is set for the whole year 2008 compared to 2007. However, the bank’s growth rate has nearly reached 30% already, which also means that it cannot provide more loans.
Another bank said that it does not lack capital, but cannot give more loans because of the cap of 30%. And yet another bank said that it has been focusing on collecting debts to reduce the credit growth rate to 30%, while it does not intend to expand credit.
Exporters crying
Exporters have expressed their protest against the regulation on limiting foreign currency loaning since right after Decision No 09 was enacted.
Do Ha Nam, General Director of Intimex, said that the limitation on foreign currency loaning will push production costs up and make products less competitive. He said that exporters may have to re-calculate export plans.
Nguyen Hoai Nam, Deputy Secretary General of the Vietnam Association of Seafood Exporters and Producers (VASEP), said that seafood exporters won’t be hurt severely as they can borrow VND to collect domestic materials. However, he said that the limiting of foreign currency loans will remove business’ opportunities to reduce production costs by borrowing US$ capital at lower interest rates.
Meanwhile, a HCM City-based garment export company said that the new regulation will put big difficulties on garment companies, which have to import 80% of materials needed.
Credit growth rate should not be same for banks
Bankers say that the cap of 30% for all banks proves to be unreasonable. While big banks, especially state owned banks, do not use up the ‘quota’ they are allocated, other banks, including joint stock banks, complain that they do not have enough ‘quota’ to lend.
The banks which have advantages in loaning, should be allowed to have a higher credit growth rate than 30%. Meanwhile, the banks which only have advantages in mobilising capital, not in lending, may not use up the quota they have.
Analysts also say that the credit growth rate of the national economy should be kept at 30%, while the cap of 30% should not be applied to every bank.
VNN
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